Latest / Bloomberg Intelligence / Aireon’s Space-Based System Tracks Planes In Real Time

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Aireon’s Space-Based System Tracks Planes In Real Time · Bloomberg Intelligence

• 0:02
  Speaker 1: Welcome to the Bloomberg Penl podcast. I'm Paul swing you.
• 0:05
  Speaker 1: Along with my co host Lisa Brahma Wicks. Each day
• 0:07
  Speaker 1: we bring you the most noteworthy and useful interviews for
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  Speaker 1: you and your money. Whether at the grocery store or
• 0:12
  Speaker 1: the trading floor. Find a Bloomberg Penl podcast on Apple
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  Speaker 1: podcast or wherever you listen to podcasts, as well as
• 0:17
  Speaker 1: at Bloomberg dot com. Well. On April two, a technology
• 0:23
  Speaker 1: company plans to go live with a space based aircraft
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  Speaker 1: surveillance system which will track plans globally in real time
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  Speaker 1: for the first time ever. Now plans are tracked by radar,
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  Speaker 1: but sev of the planet is uncovered by radar, which
• 0:36
  Speaker 1: is especially problematic over oceans. I did not know that
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  Speaker 1: joining us here to walk us through this new technology
• 0:42
  Speaker 1: is Don Toma, CEO of Arion, based on McClean Virginia. Don,
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  Speaker 1: this sounds like a game changer technology to me, is it.
• 0:51
  Speaker 1: That's great? That's right, Paul, thanks for having having me
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  Speaker 1: on the program. Now this is really being hailed as
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  Speaker 1: a major technological advancement in aviation. As you mentioned, your
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  Speaker 1: of the world is not tracked by any any means
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  Speaker 1: at this point in real time and meaning there's no
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  Speaker 1: surveillance for air traffic controllers. And you know, typically the
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  Speaker 1: world has been using radar technology that has been developed
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  Speaker 1: back in the nineteen thirties and forties as the primary
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  Speaker 1: means of of tracking aircraft for air traffic control. But
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  Speaker 1: the world's air traffic control organizations are in a program
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  Speaker 1: to upgrade that technology to a g P, a GPS
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  Speaker 1: based system for tracking the aircraft. And what Arean is
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  Speaker 1: doing is bringing that technology to the entire world. Currently
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  Speaker 1: it's limited to some certain regions like the continental US,
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  Speaker 1: your parts of Europe, parts of Australia, etcetera. But you know,
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  Speaker 1: starting next week will begin providing this service to air
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  Speaker 1: traffic controllers all over the world immediately. So, John, when
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  Speaker 1: I first started reading about this, my my initial question
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  Speaker 1: was what took so long? Because we've had space satellites
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  Speaker 1: for a long time that track lot of things, So
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  Speaker 1: why shouldn't we have some sort of all encompassing surveillance system.
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  Speaker 1: And then it struck me maybe this is a security
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  Speaker 1: issue and international issue, and I'm wondering what that challenge
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  Speaker 1: was like getting this up and running in order to
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  Speaker 1: get clearance to surveill areas that were not within the
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  Speaker 1: United States. Yeah, that's a that's a good question. As
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  Speaker 1: I mentioned, part of this part of the reason why
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  Speaker 1: this is possible now is first that the world's air
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  Speaker 1: traffic control organizations are making this upgrade. You may have
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  Speaker 1: heard next gen for the next gen program, the next
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  Speaker 1: Generation air traffic Control program within the US UM, but
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  Speaker 1: the US, Europe, Australia, Singapore, a few other countries have
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  Speaker 1: mandated that all aircraft by have on board a transponder
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  Speaker 1: that will broadcast out that GPS information from the aircraft
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  Speaker 1: at a very frequent, very precise level. So first you
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  Speaker 1: had to have all the aircraft equip with this new
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  Speaker 1: technology to make it possible. But then you you have
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  Speaker 1: the limitations of where you can put towers to receive
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  Speaker 1: that information. So, as I mentioned, the US has deployed
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  Speaker 1: six thirty five towers, Australia's air space has covered. Other
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  Speaker 1: countries have put this this technology in, but it really
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  Speaker 1: limits the access to it to roughly thirty percent of
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  Speaker 1: the world that you know that has you know, this
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  Speaker 1: type of ground based technology. So really the the innovation
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  Speaker 1: came due to the fact that not only were the
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  Speaker 1: aircraft craft being equipped but a ridium. You know, the
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  Speaker 1: Satellite Communications Company was in the process of launching their
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  Speaker 1: next generation satellite network. So part of that innovation came
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  Speaker 1: when we said, well why don't we when I would
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  Speaker 1: used to be at a ridium when we were looking
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  Speaker 1: at the plans for the next generation, and we said,
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  Speaker 1: why don't we use this global satellite based infrastructure two
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  Speaker 1: that sees every place on Earth and has connections that
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  Speaker 1: gets that information back in real time to put these
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  Speaker 1: A D s B or these these receivers on board
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  Speaker 1: the satellites to receive the information being transmitted by the aircraft.
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  Speaker 1: So we put the company together, We raised the investment
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  Speaker 1: with our partners at nav Canada and the air traffic
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  Speaker 1: control organizations of Italy, Ireland, Denmark and the UK formed
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  Speaker 1: the company and seven years later we have completed the
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  Speaker 1: launch of that system and are now ready to go
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  Speaker 1: operational live with it. So it's a lot of different
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  Speaker 1: components that really drove the you know, the implementation of
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  Speaker 1: this capability. So come April two, talk to us about
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  Speaker 1: the adoption. Here do you have to go sell it
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  Speaker 1: kind of country by country? How do you get this
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  Speaker 1: technology out into the marketplace? Well, it's a it's a
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  Speaker 1: good question, Paul. Then the issue here is that this
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  Speaker 1: is such a game changer, you know, in in you know,
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  Speaker 1: in the aviation that countries have been working with us
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  Speaker 1: for a very long time. So currently, on April two,
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  Speaker 1: will go live with the Canadian air traffic control organization
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  Speaker 1: nav Canada and the UK air Traffic control organization called NETS,
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  Speaker 1: and we'll begin using this service in northern Canada and
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  Speaker 1: in the North Atlantic. Now, the North Atlantic is a
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  Speaker 1: very busy set the air space flights a day, you know,
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  Speaker 1: it's it's running out of capacity because there's so much
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  Speaker 1: traffic going back and forth between the Europe, Europe and
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  Speaker 1: North America, you know, and this is an innovation that
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  Speaker 1: not only improves the safety of air travel, but also
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  Speaker 1: allows them to add additional flight paths for aircraft into
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  Speaker 1: that that airspace. So we'll go live with those two
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  Speaker 1: right away, but right behind them, we have nine other
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  Speaker 1: air traffic control organizations representing twenty eight countries around the
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  Speaker 1: world that will be are currently receiving the data, doing
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  Speaker 1: their own test and valuation validation of the service, and
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  Speaker 1: we'll begin operationally using it throughout just in thirty seconds.
• 5:37
  Speaker 1: How do you make money. Very very easy to think
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  Speaker 1: of us as a subscription service. So instead of an
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  Speaker 1: air traffic control organization deploying your radars or ground based infrastructure,
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  Speaker 1: we basically collect the data and provided to them as
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  Speaker 1: a subscription service, so they pay us a fee for
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  Speaker 1: providing them the surveillance data for their airspace. Really interesting,
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  Speaker 1: Don Thomas, thank you so much for being with us.
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  Speaker 1: Don Tom chief executive officer of Arian, which is based
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  Speaker 1: in McLean, Virginia, offering space based aircraft surveillance tracking planes globally,
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  Speaker 1: which to me, honestly my first impression. Again, I mean,
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  Speaker 1: given how many satellites are up there, it's interesting that
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  Speaker 1: this is the first of its kind. There has been
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  Speaker 1: a big discussion about how the migration from rural areas
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  Speaker 1: to urban areas will likely continue in the years to come.
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  Speaker 1: The question is number one, will it? And number two,
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  Speaker 1: how does that affect your investments both in real estate
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  Speaker 1: and beyond. Joining us now, Melissa Reagan, head of research
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  Speaker 1: for New Vine Real Estate, overseeing a hundred billion dollars
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  Speaker 1: of assets in New York, Joining us here in our
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  Speaker 1: Bloomberg Interactive Broker Studios. Melissa, thank you so much for
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  Speaker 1: being with us, Let's just start with this premise that
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  Speaker 1: there will be increased urbanization where you do see people
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  Speaker 1: moving from urban and suburban areas into cities. How much
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  Speaker 1: do you think that will continue? Yeah? Sure, thinks um
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  Speaker 1: you know, listen, we believe it will continue. And this
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  Speaker 1: is not just in the next couple of years, but
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  Speaker 1: really over the coming decades. Uh and and why so
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  Speaker 1: think about what cities offer. They offer an economic based jobs.
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  Speaker 1: It's where the vibrancy of these cities, it's where people
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  Speaker 1: want to live. It's where when you think about what's
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  Speaker 1: a what's a really growing area right now? Technology right, well,
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  Speaker 1: we know that that is actually cluster based. Right so
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  Speaker 1: once you're not in your this technology coming that techno,
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  Speaker 1: you're like, y'all want to cluster together. And that's happened.
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  Speaker 1: That happens in cities. And so we think this is
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  Speaker 1: a decades long trend that will continue. Well, one of
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  Speaker 1: the things that I think is a concern for some
• 7:43
  Speaker 1: people is just infrastructure through cities today. Some of the
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  Speaker 1: largest cities that are you know, maybe drawing populations, do
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  Speaker 1: they have the infrastructure to support it? Uh? Yes, and no,
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  Speaker 1: so I would say, but also with that as an opportunity.
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  Speaker 1: So when you think about a place like New York
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  Speaker 1: and you think about its mass transit, one of the
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  Speaker 1: best probably mess transit systems across the entire world in fact.
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  Speaker 1: But but it's from a but but but you missed
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  Speaker 1: the butt. But it's but it's aging. But it's aging,
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  Speaker 1: and therein is the opportunity kind and therein lies the
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  Speaker 1: opportunity right when you think about how to how to
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  Speaker 1: invest around infrastructure, municipal financing and things like that. So, um,
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  Speaker 1: I would say there's there's yes and no, and there's
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  Speaker 1: opportunities within that. I will just say that I was
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  Speaker 1: on the train the other day and it was stopped
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  Speaker 1: and my nine year old son called the m t
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  Speaker 1: A to complain, saying that it was unacceptable. Because yes, anyway,
• 8:38
  Speaker 1: moving right along, I will say a lot of the
• 8:41
  Speaker 1: investing strategy also depends on real estate valuations. And there's
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  Speaker 1: a question especially is the affordability uh question rises it's
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  Speaker 1: getting harder for people to buy homes in cities. How
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  Speaker 1: does that affect your thesis here? Actually pretty well? Uh
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  Speaker 1: so from a from a commercial real estate person back
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  Speaker 1: to think about it, I mean, we're not in the home.
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  Speaker 1: We're not in buying homes, We're buying apartment buildings, right,
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  Speaker 1: and so the demand for apartments and we've seen this,
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  Speaker 1: I mean, vacancy rates for apartments are your twenty year lows.
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  Speaker 1: Why is that? Because home prices are are are high
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  Speaker 1: and so it's an affordability issue and so it's really
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  Speaker 1: driven demand, particularly in the urban cores for apartments. So,
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  Speaker 1: given your urbanization theme, what are some of the markets
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  Speaker 1: that surprised you were attractive markets? Iman? I know people
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  Speaker 1: think of New York, San Francisco, but what were some
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  Speaker 1: of the markets that kind of surprised you as boy
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  Speaker 1: these are interesting? Yeah, So that's been fascinating in fact,
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  Speaker 1: and so we have this sort of way we look
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  Speaker 1: at cities kind of globally and we take that into
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  Speaker 1: the U S and we think about, you know, where
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  Speaker 1: are people moving to millennials, concentration of wealth and places
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  Speaker 1: like Salt Lake City pop up Nashville, but even in
• 9:43
  Speaker 1: places like Orlando, these are not places that an institutional
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  Speaker 1: real estate investor would have thought of twenty years ago.
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  Speaker 1: It just there was a nope, not interested. But given
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  Speaker 1: our analysis and the way we see the world moving,
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  Speaker 1: this is where millennials want to be There's a quality
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  Speaker 1: of life there, there's a connectivity there. And so those
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  Speaker 1: are the cities that actually and there's I could name
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  Speaker 1: ten more of those that would be like, really, that's
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  Speaker 1: that's really interesting. So this all makes sense. I buy it.
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  Speaker 1: I'm buying the picture that you set out there for
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  Speaker 1: a longer term. Is now the time to be getting
• 10:15
  Speaker 1: in given where we are in the housing cycle. So
• 10:17
  Speaker 1: I think there's two components that in terms of the
• 10:21
  Speaker 1: you know, there's the residential site, there's the residential market.
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  Speaker 1: Um and and already there there's been softening. But from
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  Speaker 1: a commercial perspective, which is entirely different. Um, we actually
• 10:31
  Speaker 1: look at it from a very long term perspective, right,
• 10:33
  Speaker 1: and so kind of almost outside of a cycle perspective
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  Speaker 1: and saying that these are the cities people want to
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  Speaker 1: be in that is not going to end and thereby
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  Speaker 1: that is the opportunity. Okay, fair enough. Although in New
• 10:45
  Speaker 1: York City, which is a very vibrant city, it's the
• 10:47
  Speaker 1: most populous city in the United States, we have storefront
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  Speaker 1: after storefront that's empty, that's vacant, that is eating into
• 10:54
  Speaker 1: the value of that commercial real estate. So I have
• 10:57
  Speaker 1: to wonder how this thesis square is worth retail worth
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  Speaker 1: the model is completely shifting. Yeah, absolutely, Listen agreed a
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  Speaker 1: hundred percent that in retail land there are structural shifts
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  Speaker 1: under way. Winners and losers there, and so that what
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  Speaker 1: you're seeing when you walk through New York City and
• 11:14
  Speaker 1: the vacant storefront losers, but then there's a whole other winner, right,
• 11:18
  Speaker 1: But but think about it, there's a winner. But that's
• 11:21
  Speaker 1: just the world is divided in retail, right, and that's
• 11:24
  Speaker 1: where it's going. But but here's the hard part of that.
• 11:26
  Speaker 1: So you're saying, that's great, there's winners and losers. Who's
• 11:28
  Speaker 1: going to be the winner, right, And so most of
• 11:29
  Speaker 1: my day is spend thinking about who's who is the
• 11:32
  Speaker 1: winner in that in retail And so when we think
• 11:34
  Speaker 1: about it, we think about necessity, think about a single tenant, right,
• 11:38
  Speaker 1: or you think about grocery, or you think about what
• 11:40
  Speaker 1: serves an urban community from a necessity local sustainable, authentic,
• 11:45
  Speaker 1: like what what does the millennial want? And they want
• 11:49
  Speaker 1: that authentic, local, sustainable offering. So the winners and losers,
• 11:54
  Speaker 1: and it's picking the right winner, which is not which
• 11:56
  Speaker 1: is the day job and is really hard right. Well, Melissa,
• 12:01
  Speaker 1: one of the things that I've noticed you mentioned Salt
• 12:03
  Speaker 1: Lake and I was just kind of going through that
• 12:04
  Speaker 1: market recently in that airport and they're building a huge,
• 12:08
  Speaker 1: brand new airport and it's still there's silicon slopes. I
• 12:14
  Speaker 1: was just about to say, and it's technology. When I
• 12:16
  Speaker 1: think about it, technology Austin, Texas, it was technology. Is
• 12:20
  Speaker 1: technology kind of what you look for to see sustainable,
• 12:24
  Speaker 1: long term growth. It's certainly that's one component of it.
• 12:28
  Speaker 1: I wouldn't say that's the only component, because there can
• 12:30
  Speaker 1: be other things that you know, there's finance and certainly
• 12:32
  Speaker 1: just business professional jobs. But technology has become at the
• 12:35
  Speaker 1: forefront because I think about it. Used to be when
• 12:37
  Speaker 1: you thought about technology, it was really Sanrancisco in Austin,
• 12:39
  Speaker 1: but that's not true. Today. It's New York, it's it's
• 12:41
  Speaker 1: Salt Lake City, it's Chicago, it's it's Atlanta, it's natural
• 12:45
  Speaker 1: it's everywhere. Um So it is one thing we look
• 12:47
  Speaker 1: at it and say it's like the only factor, but
• 12:49
  Speaker 1: it's definitely one thing we look at. Do you think
• 12:52
  Speaker 1: that the interest in warehouses and in uh aging homes
• 12:57
  Speaker 1: and facilities that that has gone too far? Are at
• 13:00
  Speaker 1: this point. It is now where the opportunity lies anymore
• 13:03
  Speaker 1: in the warehouse sector. Yeah, oh no, I think so.
• 13:08
  Speaker 1: I get that common a lot of seeing well, isn't
• 13:09
  Speaker 1: warehouse sort of you know, it's it's it's peak pricing,
• 13:12
  Speaker 1: or isn't all the demand you know, fully baked in um?
• 13:15
  Speaker 1: Actually no, I think they're if you believe remember my
• 13:19
  Speaker 1: retail comment winners and losers. What is driving that the
• 13:21
  Speaker 1: e commerce rate of retail sales? And I don't think
• 13:24
  Speaker 1: that's going away, Like I think people are going to
• 13:26
  Speaker 1: continue to shop online. It creates winners and losers in retail,
• 13:29
  Speaker 1: but it is a long term structural winner behind industrial um.
• 13:34
  Speaker 1: And I don't see if that tail wind stops then
• 13:36
  Speaker 1: then yes, we've got issues we need to look at
• 13:38
  Speaker 1: in the industrial space, but I don't see that stopping.
• 13:41
  Speaker 1: Interesting Melissa, Thank you so much. Melissa Reagan ahead of
• 13:44
  Speaker 1: research for Neuvin Real Estate, joining us in our Bloomberg
• 13:47
  Speaker 1: Interactive Broker's studio talking about urbanization and it's at least
• 13:50
  Speaker 1: it's one of the things you know, you think about it.
• 13:52
  Speaker 1: I hear about it in so many different cities, whether
• 13:54
  Speaker 1: it's in Atlanta or a Richmond, because you know, not
• 13:57
  Speaker 1: necessarily big top ten markets, but if they've got a
• 14:00
  Speaker 1: technology hub or maybe healthcare hub, um, that is what
• 14:04
  Speaker 1: can drive growth in some of those markets. Look, it's
• 14:06
  Speaker 1: for the younger people, it's the jobs. For the older people,
• 14:08
  Speaker 1: it's access to healthcare and easy you know, food and transportation.
• 14:13
  Speaker 1: So a lot of arguments for this. Well, interest rates
• 14:31
  Speaker 1: globally continue to grind lower. We actually have negative interest
• 14:35
  Speaker 1: rates and major economies such as Japan, Germany, Switzerland. So
• 14:39
  Speaker 1: help us get a sense of how to navigate through
• 14:41
  Speaker 1: this unique environment. We welcome Dr Brendan Brown. Dr Brown
• 14:45
  Speaker 1: is a Senior fellow at the Hudson Institute and publisher
• 14:48
  Speaker 1: of the newsletter Monetary Scenarios UH and he is based
• 14:51
  Speaker 1: in London. Dr Brown, thank you so much for joining us.
• 14:54
  Speaker 1: So what do you make of this persistent negative yields
• 14:58
  Speaker 1: in against some major markets like Switzerland, Germany and Japan. Well,
• 15:03
  Speaker 1: the negative rates in Europe and Japan essentially are are
• 15:08
  Speaker 1: result of serious monetary manipulation, and the central banks in
• 15:13
  Speaker 1: Europe and Japan have made it clear in response to
• 15:17
  Speaker 1: the softening of the global economy that we're going to
• 15:21
  Speaker 1: go even further into these radical monetary policies um in
• 15:28
  Speaker 1: in the total picture. It's difficult to see these negative
• 15:32
  Speaker 1: rates is telling you or anything seriously about the real economy,
• 15:36
  Speaker 1: because it's a long time since bond markets in those
• 15:39
  Speaker 1: countries have had any economic meaning. Well, Brennan, one thing
• 15:44
  Speaker 1: that I'm struck by is the fact that, yes, this
• 15:47
  Speaker 1: is a symptom of central bank policies in the region.
• 15:51
  Speaker 1: True has been for a long time, not necessarily free
• 15:54
  Speaker 1: market kind of gauge there. That said, the fact that
• 15:57
  Speaker 1: the European economy is not taking off, in fact that
• 16:00
  Speaker 1: is slowing down in many measurable ways, is raising a
• 16:04
  Speaker 1: really existential question. Here are negative rates hurting more than
• 16:07
  Speaker 1: they're helping, And so far the e c B is
• 16:09
  Speaker 1: kind of saying, well, the jury is sort of out,
• 16:11
  Speaker 1: but they're starting to play with the idea that perhaps
• 16:15
  Speaker 1: helping out banks in different ways. Can you speak a
• 16:18
  Speaker 1: little bit about them and do you think that they
• 16:20
  Speaker 1: are addressing the issue of the dutchmental effects of negative
• 16:23
  Speaker 1: yields in an expedient way right now? Well, the main
• 16:28
  Speaker 1: effect of negative rates on the economies comes through the currency,
• 16:33
  Speaker 1: and the yen and the euro have been seriously depressed
• 16:39
  Speaker 1: by this negative rate regime. The puzzle here is, given
• 16:44
  Speaker 1: the cheapness of the currencies, why investment in the export
• 16:49
  Speaker 1: sectors in Germany in particular and Japan has only been
• 16:53
  Speaker 1: lukewarm even at the peak of a boom last year.
• 16:57
  Speaker 1: And I think what we're seeing there is that businesses
• 17:00
  Speaker 1: realize that this is an artificial situation, and so they're
• 17:04
  Speaker 1: not prepared to rev up fully and haven't been prepared
• 17:07
  Speaker 1: to rev up fully on what may be a transitory
• 17:12
  Speaker 1: manipulated rate. Now, on top of that, we've got the
• 17:16
  Speaker 1: position of the banks, and you mentioned Europe. In Japan
• 17:20
  Speaker 1: in many ways, I think there's a greater hidden problem there.
• 17:24
  Speaker 1: The Japanese banks and Japanese financial institutions, to escape negative rates,
• 17:30
  Speaker 1: have been involved in more and more risky particularly cross
• 17:34
  Speaker 1: border lending, and that could create a serious funding is
• 17:40
  Speaker 1: to particularly in dollar funds, if we get into another
• 17:43
  Speaker 1: period of financial market downturnal stress. So Dr Brown, we've
• 17:47
  Speaker 1: been talking about the weakness in Europe, and certainly the
• 17:49
  Speaker 1: Brexit uncertainty has certainly been a contributor to that weakness.
• 17:54
  Speaker 1: I have to ask you, you know you're based in London,
• 17:57
  Speaker 1: You're right there in ground zero what is your sense
• 18:00
  Speaker 1: of how this thing is going to play out in
• 18:02
  Speaker 1: terms of Brexit over the next several days. I think
• 18:05
  Speaker 1: it's leaning more and more towards no deal. But no
• 18:09
  Speaker 1: deal doesn't mean crash out or anything else. It probably
• 18:12
  Speaker 1: means everyone staying where they are until there's a bit
• 18:18
  Speaker 1: more clarity on the political direction. In particular, I would
• 18:21
  Speaker 1: imagine that there could be a temporary standstill of the
• 18:24
  Speaker 1: clock turned back to allow time for a leadership election
• 18:28
  Speaker 1: to take place in the Conservative Party, and then we
• 18:31
  Speaker 1: see what happens. If I had to plot a central
• 18:34
  Speaker 1: scenario through all that, it's going to be that we
• 18:37
  Speaker 1: get a new leader of a Conservative party more in
• 18:40
  Speaker 1: the Brexit side, and that new leader will want to
• 18:45
  Speaker 1: start negotiations again on a deal rather than just taking
• 18:50
  Speaker 1: the May Deal as it is. So there will be
• 18:52
  Speaker 1: a period most likely of so called no deal Brexit.
• 18:56
  Speaker 1: To me, reminds me of like a Monty Python sketch.
• 18:59
  Speaker 1: I mean, as Lee at a certain point, you know,
• 19:02
  Speaker 1: let's vote on the vote of the vote of maybe
• 19:04
  Speaker 1: meeting and maybe we can discuss something that might actually happen,
• 19:07
  Speaker 1: and maybe we can extend the deadline a little bit further.
• 19:10
  Speaker 1: But Brendan. I do have to wonder, especially as German
• 19:12
  Speaker 1: bond yields continue to decline. Today they're they're taking a
• 19:15
  Speaker 1: bit of a breather. But right now ten year bond
• 19:18
  Speaker 1: yields in Germany lower than similarly dated bonds in Japan.
• 19:22
  Speaker 1: Are we seeing the full on Japanification of the Eurozone,
• 19:26
  Speaker 1: in particular Germany, and what are the implications for raids
• 19:29
  Speaker 1: going forward. I don't think with the Japanification, partly because
• 19:34
  Speaker 1: I think that Japanification is a myth. Anyhow, Japan, if
• 19:36
  Speaker 1: you adjusted of a democratic demographic factor, has been doing
• 19:40
  Speaker 1: remarkably well and on some measures even better than the
• 19:42
  Speaker 1: US in terms of employed person per head. But I
• 19:46
  Speaker 1: think when you look at the German negative yields, why
• 19:51
  Speaker 1: are there minus nor point one zero? I would say
• 19:54
  Speaker 1: the critical factor there is that the market has discounted
• 19:59
  Speaker 1: consider r or likelihood of Italy leaving European monetary Union
• 20:05
  Speaker 1: at some point in the next few years, if not sooner.
• 20:08
  Speaker 1: So what you're seeing in the German bond market is
• 20:10
  Speaker 1: in fact an option that what you might have there
• 20:13
  Speaker 1: if you hold the German government bond at some point
• 20:16
  Speaker 1: is a reincarnated Deutsche Mark. Now that that's that's why
• 20:19
  Speaker 1: we are where we are. But nonetheless, negative bond deals
• 20:23
  Speaker 1: are a huge incentive to real estate speculation in Germany,
• 20:28
  Speaker 1: and in a recent note I put out, I do
• 20:30
  Speaker 1: draw attention to the construction boom and the real estate
• 20:33
  Speaker 1: boom in Germany as being an important offset all the
• 20:37
  Speaker 1: bad news we're getting on the export side. So do
• 20:41
  Speaker 1: you feel well, let's just push it out there. In
• 20:43
  Speaker 1: terms of the European Union, you talked about Italy maybe
• 20:45
  Speaker 1: falling out. What is your view of the European Union
• 20:48
  Speaker 1: in general over the next five to ten years. Is
• 20:51
  Speaker 1: it going to look materially different than today? Very much so.
• 20:56
  Speaker 1: I think first a lot of that would will turn
• 20:58
  Speaker 1: on the key developments in Germany and Italy, and I
• 21:04
  Speaker 1: would say in particular that any sort of Brexit crisis
• 21:08
  Speaker 1: or hard breakout or whatever could accelerate that through leading
• 21:13
  Speaker 1: to political quake Germany. In particular, middle sized businesses who
• 21:19
  Speaker 1: are very dependent on the UK market may take what's
• 21:23
  Speaker 1: happening here as a reason to push harder vote against
• 21:28
  Speaker 1: Merkel as soon as the European elections in in late May.
• 21:33
  Speaker 1: So I do see a growing divergence coming about between
• 21:38
  Speaker 1: the German and Italian situation and that being crucial to
• 21:41
  Speaker 1: how you pant out. Dr Brendon Brown, thank you so
• 21:44
  Speaker 1: much for being with us. Dr Brendon Brown, Senior Fellow
• 21:47
  Speaker 1: at the Hudson Institute and publisher of the newsletter Monetary Scenarios.
• 21:51
  Speaker 1: Joining us from London, I want to talk about one
• 22:09
  Speaker 1: particular financial issue in New York City, and that is
• 22:12
  Speaker 1: congestion pricing. It does seem like that plan is moving
• 22:16
  Speaker 1: closer to reality. Joining us now, Henry Goldman, government importer
• 22:19
  Speaker 1: for Bloomberg News. Joining us from New York City Hall. Henry,
• 22:23
  Speaker 1: what is the latest on the congestion pricing proposals currently
• 22:26
  Speaker 1: working its way through state n city legislatures. Well, the
• 22:31
  Speaker 1: there's sort of an agreement in principle between the Assembly,
• 22:35
  Speaker 1: the Senate, and the governor that this is the way
• 22:38
  Speaker 1: to go. UH. Why is it the way to go?
• 22:42
  Speaker 1: Because New York City UH is facing a twin crisis
• 22:46
  Speaker 1: where we've got traffic congestion in Midtown Manhattan. It's costing
• 22:52
  Speaker 1: the city economy maybe twenty billion dollars a year according
• 22:57
  Speaker 1: to the Partnership for New York City. At the same time,
• 23:01
  Speaker 1: we've got a matched transit crisis where we need an
• 23:06
  Speaker 1: infusion of billions and billions of dollars, and so we
• 23:09
  Speaker 1: need the revenue that congestion pricing could bring us. So
• 23:13
  Speaker 1: that's basically why this thing is developed with such urgency. So, Henry,
• 23:19
  Speaker 1: what is actually the timing here? It seems to have
• 23:22
  Speaker 1: been put on the fast track here. What's the timing? Well,
• 23:25
  Speaker 1: this the state has a budget that needs to be
• 23:30
  Speaker 1: approved by the legislature by April one, So April fools
• 23:35
  Speaker 1: Day is the day when the legislature comes up budget
• 23:40
  Speaker 1: that's too much. That's Rich April Fool's Day. We passed
• 23:43
  Speaker 1: congestion pricing. Just kidding. Uh, this was a proposal that
• 23:47
  Speaker 1: has been out there and floated for a long time.
• 23:49
  Speaker 1: There are many other cities that have done at Singapore, Stockholm,
• 23:52
  Speaker 1: London is thinking of expanding or increasing the costs. Why
• 23:56
  Speaker 1: is the opposition so much less powerful this time around?
• 24:00
  Speaker 1: Probably because of the compelling nature of these twin crises.
• 24:03
  Speaker 1: We've got just a city in Manhattan that's just congested
• 24:10
  Speaker 1: to the point where people can't move, so appointments are
• 24:13
  Speaker 1: missed and people are sitting in their cars, and gasoline
• 24:18
  Speaker 1: is burning and asthma is getting you're making it sound
• 24:22
  Speaker 1: like we're living in accessful It's really not that bad.
• 24:25
  Speaker 1: It is bad. The congestion in midtown Manhattan is costing
• 24:31
  Speaker 1: the city's economy billions of dollars in missed appointments, in
• 24:38
  Speaker 1: work that doesn't get done, in UH, wasted fuel, in
• 24:43
  Speaker 1: medical costs of pollution. That's all on the congestion side.
• 24:48
  Speaker 1: Then beyond that, we have a subway system that's a
• 24:51
  Speaker 1: hundred years old. We went through a Summer of Hell
• 24:55
  Speaker 1: last year where subway breakdowns became the routine. All of
• 25:01
  Speaker 1: this has gigantic economic costs and health consequences. So it's
• 25:07
  Speaker 1: it's not a it's not a minor or trivial thing. So, Henry,
• 25:12
  Speaker 1: how does actually work? Am I gonna be paying higher
• 25:15
  Speaker 1: tolls now? Well? Uh, yes, the details have not been
• 25:22
  Speaker 1: worked out, but yes, when you raise revenue, somebody pays.
• 25:26
  Speaker 1: Now who pays? People who are entering Manhattan's UH congestion
• 25:32
  Speaker 1: zone south of sixty one Street, there will be electronic
• 25:37
  Speaker 1: scanners or transponders or some technology that will scan licenses
• 25:42
  Speaker 1: or use an easy path like device, and once you
• 25:46
  Speaker 1: cross that boundary, you will be told a certain amount
• 25:49
  Speaker 1: of money that yet to be determined. There was a
• 25:52
  Speaker 1: study a few years ago that said it at eleven
• 25:56
  Speaker 1: dollars and fifty two cents that was enough to raise
• 26:00
  Speaker 1: is maybe a billion dollars in revenue, and that billion
• 26:03
  Speaker 1: dollars in revenue could then be leveraged in municipal bonds
• 26:07
  Speaker 1: to borrow maybe fifteen billion dollars uh and pay the
• 26:12
  Speaker 1: debt service on that. So that's the kind of money. Uh,
• 26:16
  Speaker 1: that's a start. It's only a start in facing the
• 26:19
  Speaker 1: transit needs of the city and the region because there
• 26:24
  Speaker 1: are commuter rail needs that must be taken care of. Now,
• 26:29
  Speaker 1: So who's paying the people who drive south of sixty
• 26:32
  Speaker 1: one Street. Now, let's say you're taking a bus into
• 26:35
  Speaker 1: New York City. I'm sorry, that's a you're taking a
• 26:38
  Speaker 1: car and you're gonna cross a bridge into New York City. Uh.
• 26:44
  Speaker 1: Those people who are already paying eleven dollars or more
• 26:47
  Speaker 1: on the bridge, they don't want to pay another eleven
• 26:51
  Speaker 1: dollars or more to get into Midtown Manhattan. And there
• 26:55
  Speaker 1: will probably be some system of credits that will allow
• 26:59
  Speaker 1: them to offset the price of taking that bridge. But
• 27:04
  Speaker 1: the bottom line is, Henry, it seems like this is
• 27:07
  Speaker 1: coming people are gonna pay um one way or the other.
• 27:10
  Speaker 1: And uh again, it's been tried, as Lisa mentioned, in
• 27:13
  Speaker 1: other parts of the world, and so this might be,
• 27:15
  Speaker 1: you know, this might, Lisa, just be the perfect storm.
• 27:17
  Speaker 1: So we'll have to see. Henry Goldman, thank you so much.
• 27:19
  Speaker 1: Henry's a government reporter for Bloomberg News calling us from
• 27:22
  Speaker 1: New York City Hall. But it just seems like, you know,
• 27:24
  Speaker 1: with what's going on with the mass transit and how
• 27:26
  Speaker 1: much money Mass Transit needs, this just might be the
• 27:29
  Speaker 1: revenue solution. So it might be a perfect storm where
• 27:31
  Speaker 1: things can actually get done here. Thanks for listening to
• 27:33
  Speaker 1: the Bloomberg P and L podcast. You can subscribe and
• 27:36
  Speaker 1: listen to interviews at Apple Podcasts or whatever podcast platform
• 27:39
  Speaker 1: you prefer. Paul Sweeney, I'm on Twitter at pt Sweeney
• 27:42
  Speaker 1: and Lisa bram Woyd's I'm on Twitter at Lisa Bramwoyit's
• 27:45
  Speaker 1: one before the podcast. You can always catch us worldwide.
• 27:48
  Speaker 1: I'm Bloomberg Radio.